DOWNTOWN : Agreement Sought on Developer’s Rent

The city Community Redevelopment Agency has begun negotiations with Bunker Hill Associates, developer of the California Plaza, to collect at least part of the $3 million in back rent the company owes the agency.

Agency officials hope the developer will pay at least $2.1 million of the overdue holding rent the company was supposed to pay to reserve land in the California Plaza project, which is three buildings from completion.

Officials from both sides expressed optimism that an agreement will be made. But if the two sides fail to renegotiate a new holding rent agreement in two months, the agency could still force Bunker Hill Associates to pay $2.1 million in bond proceeds--as well as drop the company as developer of the yet-to-be-built towers--by pursuing default actions. Agency officials said they hope to avoid those default proceedings, in part because the agency must then find another developer to finish the project.

“We’d like to keep up the relationship with (Bunker Hill Associates) because they have performed so well and proven themselves as willing and capable developers,” said Jeffrey Skorneck, project manager for the redevelopment agency.

Under a 1981 development pact, Bunker Hill Associates agreed to build out the five-block California Plaza in phases over 10 years. An L-shaped area bordered by Grand Avenue, 2nd, Olive, Hill and 4th streets, the plaza offers a mix of commercial, residential and cultural uses.

So far, Bunker Hill Associates has constructed two office buildings, one condominium tower and the Hotel Inter-Continental at the plaza, which also houses the Museum of Contemporary Art. A third office building and two residential buildings, with a total of 523 units, remain to be built.

But Bunker Hill Associates has not submitted drawings for the remaining construction phases and stopped paying holding rent in March, 1992, when the monthly rent ballooned from $12,000 to $125,000.

The huge rent jump was negotiated in the development agreement to encourage the plaza’s timely development and prevent the land from being tied up indefinitely, the agency’s staff said. The project was expected to have been completed by 1992.

But Bunker Hill Associates now wants the agency to reconsider this rent increase in light of the local economy and real estate market.

The developer wants to remain in the project and is committed to finishing it, said Peggy Adams, senior vice president and general counsel for MS Management Services, the local representative for Bunker Hill Associates.

But Adams would not say if her company would agree to pay the $2.1 million the agency seeks. She said a number of related issues must also be addressed during the negotiations.

One of those considerations is how to accommodate a local performing-arts school that is interested in moving to the California Plaza. The R.D. Colburn School of Performing Arts, which provides music, dance and drama classes to 800 students aged 3 to 18, is now housed near USC in “inadequate facilities,” the agency’s staff said.

The school said it has sufficient money to construct and operate the school at California Plaza, but has asked the agency for a long-term lease at a nominal cost. The agency’s staff spoke favorably of the idea, noting that the school would benefit from California Plaza’s proximity to the Music Center, the future Walt Disney Concert Hall and the potential to interact with professionals, while California Plaza would benefit from having a school that would be open evenings and weekends as a tenant.

“We think it’s the sort of institution that can add a lot of activity, culture and opportunity,” Skorneck said.